Best Working Capital Loans of 2018

Working capital loans can help you pay for operational costs, such as rent, payroll and debt payments. Access to working capital gives you the flexibility to invest in your company’s growth and cover day-to-day expenses, but you shouldn’t use the loans for long-term investments, such as real estate.

Banks offer the lowest financing rates on these loans, so if you own an established business with strong cash flow, you may want to start there. But if the bank says no or if you need cash fast, you can turn to alternative lenders. You’ll likely pay higher interest rates for working capital from alternative lenders than from banks.

Working capital financing options include a term loan, a business line of credit or invoice factoring. Business credit cards can also provide access to working capital, and you can earn rewards in the process.

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Working capital loans for everyday needs

The term working capital can encompass virtually every facet of your finances, but ultimately you need it to, well, keep your company working. That could include coping with seasonal dips in revenue, covering maintenance costs, keeping your payroll up to date or managing your inventory.

If your personal credit score is at least 500:Kabbage offers a quick working-capital line of credit up to $150,000.

Pro: Good option for borrowers with poor credit who need fast cash

Con: Annual percentage rates can reach 99%

If your personal credit score is more than 600:StreetShares is a peer-to-peer lender that offers lines of credit and term loans to businesses making at least $25,000 a year.

Pro: Good option for businesses with low revenue

Con: Can borrow only up to 20% of your annual revenue

If your business needs more than $100,000: A term loan from OnDeck is an option; the lender provides loans of up to $500,000.

Pros: High borrowing amounts, up to $500,000; minimum personal credit score is 500, but most borrowers have 660 or higher

Con: APRs can reach 99%

Everyday needs also can be financed with a business credit card. You’ll also have the added benefit of building your business credit and earning rewards, such as cash back or travel miles.

Pro: Earn rewards on business purchases

Con: Typically requires good personal credit to qualify; credit limits are typically lower than a business line or line of credit

Working capital loans if you have unpaid customer invoices

Companies that work in the business-to-business sector will face gaps in cash flow. To help keep your business running while the check’s in the mail, consider invoice financing. It’s a good option when you’re in a pinch, although high APRs make these services pricey.

For businesses with strong-credit customers:BlueVine can front you cash of up to $5 million even if your business is less than a year old and you have poor credit.

Pro: Good way to tap into a customer’s strong credit score

Con: If your customer doesn’t pay you, you’re still on the hook for the loan

For businesses with shaky credit: If you need fast financing, Fundbox can get you cash in one to three business days.

Pro: No minimum revenue or personal credit score required to qualify

Con: Must have access to accounting software like QuickBooks

Good option if you:

Have bad personal credit

Own a business with strong-credit customers

Own a newer business

Have bad personal credit

Need fast cash

Want to finance smaller invoices

Do you qualify?

530+ personal credit score

3+ months in business

$100,000+ in annual revenue

No minimum credit score

Must use online accounting software such as QuickBooks, FreshBooks or Xero

Evaluate small-business loans carefully

When looking for a working capital loan, it’s important to compare all of your options based on APR, which represents the true cost of the loan, including all fees. To evaluate other loans, you can go to NerdWallet’s small-business loan tool. NerdWallet’s list of lenders is based on factors including market scope, customer experience and lender trustworthiness.

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